With a huge federal budget deficit preoccupying lawmakers in Washington these days, the specter of rising personal income tax rates for wealthy taxpayers has been raised by the Obama administration and others as a way to slowly step back from the deficit precipice.

Given the intractability of Congress, it’s a scenario that seems unlikely in the short term. But many forward-thinking wealth managers are beginning to address with their clients the possibility of tax rates eventually returning to those of the pre-Bush tax cut years at some point, and the effects that such an increase will have on their investing and tax planning strategies.

Chief among their concerns is the impact of rising rates on capital loss carry-overs. These are losses in excess of deductible limits for the current tax year but can be carried over into future tax years.

For many, investment losses in recent years have been steep, mainly due to the turmoil in both public and private markets. Now these investors are faced with putting their banked capital losses to work using methods that don’t run afoul of the IRS.

But wait – in a rising tax rate environment, wouldn’t these capital losses potentially be worth more? Current tax law says that excess capital losses can be carried forward indefinitely, which is why some wealth managers are advising a wait-and-see strategy.

There are a few reasons why this approach might not be the best answer in certain situations though. One is the true meaning of the provision that capital losses can be carried over “indefinitely.” In reality, the capital loss carry-over actually does have an expiration. Once the taxpayer or his/her surviving spouse dies the benefits of the carry-over disappear. Any unused capital losses are wasted at that point – they can’t be passed on to future generations like an heirloom.

The other drawback to the waiting game is the surprisingly common misperception that capital losses could be potentially worth more if the rates on capital gains, interest and dividends were to rise.

This issue tends to crop up during estate planning discussions in which the taxpayer wishes to gift securities to family members using the most tax-efficient methods available. Ordinarily, when a stock is gifted, the cost basis that is picked up by the recipient is, at most, the basis in the hands of the donor.

So for example, let’s say Uncle Joe paid $10 for a stock that is worth $40 when he gifts it to his niece Rachel. The $10 cost basis transfers with the gift; if Rachel decides to sell it for $40, she will owe capital gains tax on the $30 of appreciation (assuming she has no capital losses of her own to offset this gain).

But Uncle Joe has another, more tax-efficient option. It turns out that like many of his investment-oriented peers, Joe has accumulated substantial capital losses during the stock market’s recent roller coaster ride – in his case, nearly $300,000.

To lessen the sting, he can harvest those losses by selling that $40 stock first, offset the resulting capital gain with his otherwise idle losses, and then reset the basis of those same stocks he plans to gift to Rachel by buying them back immediately at the same price, presuming of course that the stock is still desirable to hold. From a tax standpoint, it’s clearly a beautiful win for both people. (Note, though, that the one-year holding period clock on long-term gains is also reset on Joe’s repurchased shares.)

Now here’s the thing: in this scenario, the future direction of tax rates is irrelevant. The tax effect is the same either way. The sale of appreciated securities is offset by loss carry-over dollars. The same securities are repurchased at virtually the same price. The stock’s cost basis is stepped up dollar-for-dollar, resulting in no tax either way.

To be sure, Uncle Joe could also use his capital loss carry-over to offset his own ordinary income from wages and other sources up to $3,000 per year. But with the substantial losses he’s accumulated, he will be long gone (and his loss carry-overs with him) before that strategy ever pays off.

Now for some wealth managers and their clients, the notion of repurchasing a stock immediately after it is sold might appear to put the investor in jeopardy of breaking the tax code’s “wash sale” rules. These provisions effectively disregard current loss deductions if the same stock is repurchased fewer than 30 days before or after the sale.

But these rules apply only to stocks that are sold at a loss. In Uncle Joe’s case, he would be selling his stocks at a gain. He is free to repurchase immediately, and the transaction is not disregarded, even though the substantial gain will be offset by his otherwise idle investment losses.

So, what will be the direction of tax rates on capital gains, dividends and interest in the immediate future? Will Congress and the White House find the political will to confront the country’s growing debt crisis with legislation that forces some combination of higher taxes and spending cuts? Or will the New Year bring us nothing more than the same old song and dance?

Given the pattern of shenanigans inside the Beltway, predicting the answers is a fool’s game. But we do know a few things for certain. The current tax rate of 15% on long-term gains is at our lifetime low. And, beginning in 2013, higher income taxpayers will face a new surtax of 3.8% tax on net investment income.

Another thing we know – or, at least, have heard enough from money managers to presume it as the conventional wisdom – is that investors shouldn’t let Uncle Sam manage their portfolios. Investments should be bought and sold based on long-term objectives and asset allocations, as determined in consultation with the client and his or her entire financial planning team.

Certainly the tax consequences of investment decisions can and should always come into play. But in a best-case scenario, they become one of many considerations – rather than the driving consideration – of sound portfolio management.

Paul Bardaro, CPA, ABV is a founding partner of Boston-based Rucci Bardaro & Falzone where he heads the Valuation and Litigation Support Services group. He also specializes in assisting investment and estate planning advisors to better anticipate and manage the impacts of federal, state and local tax jurisdictions on their clients’ assets. His email address is paulb@rbfpc.com